Shareholder advisers weigh in on special Red Lobster meeting

April 11, 2014|By Sandra Pedicini, Orlando Sentinel

Two firms that advise large investors have recommended Darden Restaurants shareholders call for a special meeting to weigh in on plans to jettison Red Lobster. Meanwhile, Darden announced late Friday that another, Egan-Jones Proxy Services, has recommended rejecting the meeting.

Glass Lewis & Co. and Institutional Shareholder Services say there are legitimate questions regarding Darden's plan to sell or spin off the chain. Egan-Jones argued such a meeting is unnecessary.

Activist investment firm Starboard Value is trying to halt Darden's Red Lobster plans. The New York hedge fund has been trying to call a special meeting for shareholders to cast a nonbinding vote. If investors holding more than half the stock ask for the meeting, Darden is obligated to hold it.

Darden argues that a special meeting is unnecessary and costly. It could discourage bids for Red Lobster and drive up the price, Darden has told shareholders.

Glass Lewis said in its report that while strategy decisions are generally best left to company management and boards, in this case Darden has " fallen short of justifying that it should be given complete deference." It cited "widespread concern and skepticism among Darden's shareholder base."

While acknowledging the costs of a special meeting, ISS said those "must also be weighed against the potential risk that a suboptimal transaction will be executed, and significantly greater shareholder value will be lost."

"We believe that shareholders should communicate their views directly to the Company and that Starboard's proposed special meeting is an inadequate alternative," Egan-Jones' report said.

Darden issued a statement Friday afternoon saying it disagrees with the findings of the Glass Lewis and ISS reports. It was critical of the Glass Lewis report, saying it "does not give appropriate consideration to the facts." Darden also said it was disappointed that Glass Lewis issued the recommendation without meeting with company managers or directors.

"All of us at Darden are focused on improving performance and enhancing shareholder value, and we believe the actions we are taking best position the Company to achieve these objectives," Darden's statement said.